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Bad bank chief: Government again taps SBI’s talent

(This story originally appeared in on May 12, 2021)

MUMBAI: The proposed ‘bad bank’, which will help public sector lenders clean up their loan books, has got its first senior executive — Padmakumar Madhavan Nair. According to sources, Nair, who is chief general manager in charge of stressed assets in the country’s largest bank , will be heading the National Asset Reconstruction Company (NARC).

The appointment comes even as there are indications that public sector banks (PSBs) have a large stressed portfolio. Punjab National Bank’s offer document for a qualified institutional placement shows that stressed loans are around 20%. “The two largest PSU banks after SBI have reported close to 20% overdue loans (not classified as non-performing). If this is the state with large PSU banks, the situation with many other smaller PSU banks could equally be alarming. This clearly shows that PSU banks have borne the brunt of Covid-related disruptions on their borrower segment,” said Macquarie Capital associate director Suresh Ganapathy.

The government has been repeatedly tapping into SBI’s talent pool for key appointments in the public sector. Last year, in the aftermath of the Yes Bank failure, SBI’s chief financial officer Prashant Kumar was chosen to head the reconstructed bank.

Earlier, the government had appointed ‘State Bankers’ Sanjiv Chadha and Padmaja Chunduru to head two of the larger PSBs — Bank of Baroda and Indian Bank, respectively. In the private sector, Dhanlaxmi Bank is headed by J K Shivan, who was also with SBI.

Ahead of last year’s mega-merger of PSBs, the government had appointed senior executives from SBI to head the merging banks to ensure a smooth process. Mrutyunjay Mahapatra, J Packirisamy and Karnam Sekar were appointed to Syndicate Bank, Andhra Bank and Dena Bank respectively. Even among asset reconstruction companies (ARCs), senior positions are held by former SBI officials, including Pallav Mohapatra as CEO of ARCIL, which was the first ARC in India. The NARC is seen as crucial to cleaning up the books of PSBs, which hold a large number of loans that turned bad in the last decade. They also have a large number of loans that are stressed and had to be restructured under the Covid-resolution plan. Experience indicates that a significant portion of restructured loans tends to go into default.

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